2 Sentenced, Ordered To Pay $1M For Mortgage Scam
About three months after one Bloomington resident was sentenced to federal prison for her role in a mortgage fraud scam, her co-defendant, also from Bloomington, was handed down a prison sentence.
Richard Scott Spady was sentenced Wednesday to two years in federal prison and two years of supervised release for his role in defrauding financial institutions and homeowners under the guise of a program to rescue homes from foreclosure, Minnesota’s U.S. Attorney’s office announced Thursday.
Specifically, Spady was sentenced on one count of conspiracy to commit wire and mail fraud and one count of filing a false income tax return; he pleaded guilty last September.
Spady’s co-defendant, Michele Denise Sengstock, was sentenced in April to one year and two months in prison on one count of wire fraud. Spady and Sengstock were also ordered to pay roughly $1.13 million in restitution.
The scheme ran between 2005 and 2007. Spady operated a company called Unified Home Solutions, which identified homeowners who were facing mortgage foreclosure or who were already in foreclosure proceedings, according to the U.S. Attorney’s office. The company would then identify investors to buy the homes with the plan to sell them back to their owners within a couple of years—in the meantime allowing the distressed homeowners to remain in their homes.
When the properties were sold, checks were issued to the original homeowners for their equity, and the homeowners then signed over the equity checks, with the proceeds to be used to cover expenses and be divided among the investors, Unified Home Solutions, and other parties, the U.S. Attorney’s office said.
But Spady admitted in his guilty plea that false mortgage loan applications and loan closing documents were prepared and that lenders were not told about the distribution of equity from the sales, according to the U.S. Attorney’s office.
In fact, the charges alleged that fewer than 10 percent of the homeowners who used Unified Home Solutions were able to retain their homes, and all the homeowners lost their equity in the process.
Sengstock assisted in the fraudulent operations of Unified Home Solutions by preparing false mortgage loan applications and closing documents.
Meanwhile, for tax years 2006 and 2007, Spady admitted to filing federal income tax returns that failed to report over $100,000 in income, resulting in an underpayment of taxes of more than $30,000, the U.S. Attorney’s office said.